Economic and diplomatic advances, however, have not 
  fueled a warm national glow. Australia's proposal to 
  increase taxes on mining became a national issue, 
  precipitating a three-month barrage of anti-government 
  campaigns paid for by the mining industry, which in part 
  led to the removal in June of Prime Minister Kevin Rudd, 
  a Chinese-speaking former diplomat. In the August federal 
  election, the ruling center-left Australian Labor Party 
  lost its majority due in large part to massive swings  
  against it in the resource-rich states of Western 
  Australia and Queensland. Supporters of the tax argue 
  that the resources are not coming back and that Australia 
  should participate more fully in the outsize profits. 
  Those against include the mine operators and the many who 
  work in the mines; mining salaries are, on average,  
  Australia's highest, according to the Australian Bureau 
  of Statistics.

The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miners for losses on projects. In reality, with the government participating in 40% of the profits and 40% of the losses, it was a part-nationalisation by stealth.

The reason the mining tax was so rejected, particularly by the mining states, was that it was to replace state-based mining royalties with a Federal mining tax. So instead of individual states receiving royalties for mineral wealth - as per the constitution, the tax money would be funnelled to the Federal government, which would then have power over where it was spent. The mineral states stood to lose power over their own revenues, and the non-mining states stood to gain income from activities that took place entirely outside their borders.

The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else.

From a 'web startup' point of view I can tell you it seemed like a lifeline to have some downward pressure on the aussie dollar (as this tax did) as well as a small decrease in tax rates. As mining heats up it becomes more difficult to operate any other export business because of increased exchange rates and pressure on wages. The danger is that we will become over-reliant on mining as it tends to squeeze out other export industries.

If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore.

It is certainly easy to have one's opinions shaped by personal circumstances. But do you really think that Australia's long term future will be best served by relying on our minerals rather than our minds? It's like the economy is telling us 'this information economy stuff is all rather nice but the best thing you could be doing now is figuring out how to find and extract minerals from the ground'. I don't happen to agree but could you honestly recommend a comp sci degree over metallurgy to a financially ambitious school leaver?

A heavy reliance on minerals and therefore on our relationship with China seems fraught with danger. Politically speaking, mining requires 'stability' where as the information economy seems to require democracy and freedom. All income is not equal.

> Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it.

It seems to me that the value of the minerals is not in danger of disappearing any time soon. So I don't really see the frantic need for us to sell it as soon as it can be economically extracted. Are we really so badly off that we need the money as soon as we can get it? Unemployment is 5%. To me the danger is that are we becoming so addicted to this revenue source that when our dealer stops supplying we won't be able to cope.

> If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore.

You must be from WA :) Seriously though I'm not sure about the best mechanism but I think this is a situation where the pure free market could become a tragedy of the commons.

I do think Australias long term future is best served by minerals at this point. There's no way of knowing what the future holds, best to bank as much now while the price is good. Yes, it holds some risk over the geopolitical situation, but you can't get rid of that.

Digging up minerals and selling them now puts Australia to work. drives down the Current Account deficit, allows us all to enjoy a higher standard of living. Put simply, Australia has comparative advantage in minerals mining so we should maximise this to the benefit of all. Unemployment is 5% because of the mining, not despite the mining.

It's not an either/or question on mining/information technology. There's plenty of room for both. Australia can lead the world in minerals, and mineral extraction technology. Australia has already built up world class mining companies that now invest internationally. Long may that continue - with a stable political climate, well developed capital markets and a home-grown skills and technology base, there's no reason why Australian miners can't be major players in worldwide resource extraction for centuries to come, even if the iron ore in the Pilbara runs out. The world will never stop mining - never has, never will.

Possibly true but on the other hand who's to say the price won't go up further in the future? If we are going to consider the possibility of major price drops then shouldn't we model the impact on the economy? Would it make even more sense to make sure we aren't too reliant on that income and that we put some money aside for this eventuality?

> Unemployment is 5% because of the mining, not despite the mining.

I think that this is because the income from mining has allowed additional consumption and that consumption has supported employment.

> There's plenty of room for both. Australia can lead the world in minerals, and mineral extraction technology.

This sounds a pretty bland to me. Like the classic quite from a 'versatile' band "we play both types of music - Country AND Western". A vibrant modern economy requires a lot more than one sector. Beside that it doesn't take advantage of us being a modern westernized English-speaking nation. I've no doubt that China and India can produce highly skilled engineers and they will tend to want to use their own companies in new mining areas such as Africa. But when it comes to developing and designing information products for a western market they at a huge disadvantage.

Given the price rises, the shareholders would be better off if they just sat on their leases and paid a capital gain.

However, there are laws against that too.

I believe government policy needs to consider resources are finite. The tragedy of the commons that is being played out at the moment prices the resouces at $0 for the future generation. Just like the way we are pricing fisheries. It is insane.

I agree with this

The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miners for losses on projects. In reality, with the government participating in 40% of the profits and 40% of the losses, it was a part-nationalisation by stealth.

I agree the mining tax was a disaster, but it wasn't as bad as you are making out. The 40% thing was always something that got the headlines, but as you point out it isn't as simple as that because it would have reduced state based royalties.

The reason the mining tax was so rejected, particularly by the mining states, was that it was to replace state-based mining royalties with a Federal mining tax.

This is true.

The mineral states stood to lose power over their own revenues, and the non-mining states stood to gain income from activities that took place entirely outside their borders.

This is also true, but not necessarily a bad thing. Australian urban centres are a long, long way from the mines and some form of distribution probably makes sense.

The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else.

I don't think the tax was loved by anyone except Rudd's kitchen cabinet (and possibly only by 3 out of them too, judging from how quickly Gillard backed off it).

But the goals of the tax are perhaps more broadly backed. The original article touched on the fact that many mining companies avoid investing in the communities (as you'd expect from a profit making entity), and this has caused some issues. From the article:

One of the local councils in the Pilbara, Shire of Ashburton, recently refused permission to Rio Tinto to expand its camp around the Tom Price mine. Instead the company has been asked to invest in facilities that will remain after the mine is closed, to spend $247 million on housing, an air strip, and other infrastructure at the town of Pannawonica. This kind of investment, and the employing of locals, is the only move that is going to convince skeptics like Tony Wiltshire.

"We were at a town meeting the other day when a representative from a mining company said, 'Come on, we're all up here to make a dollar.' The locals in the room looked at each other and thought, 'What?' We live here. We can cope with the hot summers. We're here for the long term. We are actually better for the multinationals than the contractors they fly in and fly out. We just need them to wake up to the fact that they, and we, are all in it for the long haul."

The idea of the tax was to formalize this kind of investment. The way they went about it was probably the worst planned example of domestic politics in Australia since WW2, though!

All Australians deserve returns from the investment, not just the tiny number of miners, who earn ridiculous sums of money.

The way the tax was presented it made it look like a punitive grab for mining companies profits. In the mining-rich states people started worrying about their jobs, and so the government changed Prime Minister and policy to try and head off the issue.

The fact that the Labor party screwed up pretty badly is kind of irrelevant to the idea that this is pretty straight forward international trade.

There are questions about how and how much of those profits should be spread around the country but I think that's pretty standard when there is an economic boom.

The country of Australia is an object decreasing in size and mass, due to the super-barge-2mile-long-train-robo-dumpster IV China has paid to stick in it.